Montana Coal is Costly and Getting More Expensive
By Derf Johnson
Everyone knows that coal is an incredibly dirty way to produce energy. The degradation associated with mining, transporting, and burning coal is immense. There are very real costs to Montanans and Americans that will last for generations. The economic and environmental impacts of coal read like a dirty laundry list: coal energy fouls our water, pollutes our air, displaces wildlife, negatively impacts or eliminates agricultural economies, is a public health threat, reduces economic productivity, and drives us further down the path of irreversible climate change.
These are costs that we are already paying for, and generations of our children will almost certainly have to pick up our tab. But there’s one pillar that the coal PR folks love to stand on: coal is cheap. If you ignore the very real external costs associated with coal energy outlined above, coal certainly has been cheap in the past. But all signs are pointing in a much different direction for the upfront, consumer cost of coal - that Montana coal is costly and getting more expensive.
Why Montana Coal is Costly, and Getting More Expensive
The fact of the matter is that coal isn’t that cheap now, and is rapidly becoming more expensive. The delivered cost of coal in the United States and here in Montana has increased, dramatically, since 2004, and shows no signs of leveling off any time soon. Here's a handy graph selected from a report produced by Clean Energy Action entitled "CEA Research Report: Trends in U.S. Delivered Coal Costs: 2004-2011", using data from the Energy Information Administration, that shows the delivered costs here in Montana:
What’s causing this striking increase in price? Increased production costs, increased transportation costs, and the increased pressures associated with exporting coal.
The production costs of coal are driving up prices because coal companies have to move larger amounts of earth (or “overburden,” according to the coal industry) to mine the same amount of coal. Coal companies have mined the higher value, more easily accessible deposits to extinction. Lack of easy to access resources has forced coal companies to do anything to extract more coal. This includes destroying mountains in a process known as mountaintop removal mining , and opening up new open-pit strip mines. Increasing production costs are the major reason for a very dramatic decline in production in the Appalachian region of the United States.
Further, export pressure is driving up prices In the United States because Asian countries are increasing their demand for coal. This increasing demand is fueled by rapid population growth and a lack of supply of coal in those countries.
This begs the question, exactly how does this affect me? As the cost of delivered coal rises, so does the cost of your power bill. It’s that simple. And if you live in Montana, there’s a very good chance that you are a customer of Northwestern Energy. If so, the most expensive form of electricity that you pay for on your energy bill is from coal. To be specific, electricity from Colstrip Unit 4, which Northwestern purchased and the Montana Public Service Commission authorized into your rates in 2009.
One reason, but certainly not the sole reason, that costs are so high for customers at Pennsylvania Power’s Colstrip plant is production costs at the Rosebud Mine (the mine that feeds coal directly to the plant) have steadily increased over the years, and this increase is passed onto energy consumers here in Montana every month on your utility bill. The next chart comes directly from Northwestern Energy's 2011 Electric Supply Resource Planning and Procurement Plan, and contains projections for fuel prices at the Colstrip plant for the next 20 years:
If you take the rising costs of deliverable coal, and add on the numerous externalities that we as society pay for in medical bills and increased healthcare costs, clean-up costs, lost productivity, etc., etc., it is remarkably clear that Montana coal is costly and getting more expensive. We need a rapid and thoughtful transition off of coal and onto cleaner, and cheaper forms of energy.